Asia Times: PYONGYANG WATCH: A contract is a contract



	January 22, 2000	atimes.com

The Koreas

PYONGYANG WATCH: A contract is a contract
By Bradley Martin

For several months Pyongyang has been threatening consequences if there's any delay in building the light-water reactor that South Korea, Japan and the United States are building jointly for the North under the Korean Peninsula Energy Development Organization. The promised reactor is in payment for Pyongyang's 1994 commitment to freeze nuclear-weapons development, and some of those who speak for North Korea have suggested the freeze could be thawed out quickly if there's a delay. But, as usual in these matters, it appears money would do nicely instead.

Late last month North Korea demanded compensation in case the reactor isn't finished by March this year, the date agreed on in the Geneva nuclear bomb agreement of October 1994. The reactor work is seriously behind schedule. As Seoul's JoongAng Ilbo noted, the delay is due mainly to haggling among the donor countries over how big a share each would have to pay. But never mind the cause. ''According to the North Korea-US Basic Agreement,'' said North Korea's Ministry of Foreign Affairs in a statement read over Pyongyang Broadcasting, ''if the light-water reactor is not finished on time, we should be compensated for financial loss, or some other arrangements should be made.''

This is, of course, the same North Korea that defaulted on billions of dollars in debts to the West and Japan. Those were debts Pyongyang ran up the the 1970s in an attempt to modernize - and regain its economic lead over South Korea - by importing technology. The idea was to export products in order to pay back the loans it had taken out to buy the technology. Alas, Pyongyang was unlucky in its timing and ran into a global recession triggered by the oil crisis of that decade. Exports were insufficient to finance the debt, or so it said.

The North Korean response to that predicament initially won at least fair marks for sincerity as Pyongyang renegotiated much of the debt in 1979. But in 1980 it defaulted on what it owed to creditors in the West - becoming the first communist country to do so. With the interest compounding, its hard-currency debt mushroomed - reaching, by a US government estimate, over $4 billion by 1986. That was on top of some $2 billion owed to communist countries. The Japanese eventually declared North Korea in default.

The total grew and grew, to an estimated $10 billion in 1993, $11.8 billion in 1997 - and probably at least $14 billion by now. The general unwillingness of Westerners and Japanese to extend credit, coupled with the collapse of communism in the Soviet Union and Eastern Europe, put a huge dent in Pyongyang's trade figures. It became a factor, along with mismanagement and natural disasters, in the drastic economic decline - the near-collapse - of recent years.

Starting with a September 1984 joint venture law, Pyongyang again has sought to attract foreign capital and technology. But it has had little to say to those abroad to whom it owes money. Many of them believe the regime could have paid its debts - long before they ballooned out of control - simply by whittling down the amounts spent on the military and on monuments and celebrations to build the personality cult of the late Great Leader Kim Il-sung and his son and successor, Kim Jong-il. After all, as quite a few of those creditors undoubtedly have said over and over again, a contract is a contract.

(Special to Asia Times Online)

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